Markets react to Health Care Act withdrawal

When Paul Ryan announced that the American Health Care Act (AHCA) was being withdrawn, it signaled the end of the first legislative push of the Trump Presidency and dampened hopes of unity within the Republican Party. Market trading trended downward after the announcement on Friday afternoon, and there has been substantial bleeding early this week.

The banking sector has been hit especially hard, with Goldman Sachs falling 3 percent, Bank of America 3.6 percent, and JPMorgan 2 percent.

As the vote on the AHCA approached, there were growing signs that President Trump and House leadership wouldn’t have the support they need from Republicans to pass the bill. “We’re going to be living with Obamacare for the foreseeable future,” Speaker of the House Paul Ryan said.

The vote is seen as a failed test of the President’s ability to command support from within his party, which he will need to realize his agenda. Aspects of his policy have been generating months of market growth, as Wall Street anticipated tax breaks for industry and $1 trillion in infrastructure investment.

Market gains were based on the assumption that a big win for the Republicans would clear the legislative inaction that occurred during the Obama Administration. The gains have been largest during shows of party unity, with the biggest upward jump following Donald Trump’s address to a joint session of congress. The Dow Industrial Average breached 21,000, a new record, and the SPSY jumped by 2%.

This new loss has laid bare the divisions in the party, and is undermining confidence in the future of Trump’s legislative agenda.

“This does make tax reform more difficult,” said Ryan, signaling that the Health Care loss undermined plans to overhaul the tax code by eliminating select loopholes, reducing rates, and hiking up import taxes.

The new legislative intentions for taxs are a cut for corporations and for a possible cut for individuals, which would be far easier to get through Congress.

Showing Unity

A legislative win would build confidence in the unity of Republicans. This is aimed at repairing the damage caused when the House Freedom Caucus, a conservative faction within the Republican Party, refused to support the health care bill, finding it too similar to Obamacare.

Freedom Caucus members have signaled their support for tax cuts.

“I think there has been a lot of flexibility in my contacts and conservatives in terms of making it not totally offset,” said Representative Mark Meadows, a member of the House Freedom Caucus, publicly signaling that he and his colleagues would not require tax cuts to be matched by spending decreases.

.@RepMarkMeadows to @GStephanopoulos on whether tax cuts have to be "fully offset" so as to be revenue-neutral: "My personal response is no" pic.twitter.com/dX3cqR31r6

— This Week (@ThisWeekABC) March 26, 2017

Another fissure unveiled by the vote came from outside the party.

The bill came under attack from the Koch brothers, who, early last week, threatened to defund the campaigns of Republicans who vote for the bill. This week they announced that they and their network of donors would be setting up a fund for the 2018 elections to be distributed to republicans that vote against the bill.

Charles and David Koch have given vast sums to conservative and libertarian political campaigns and organizations, and played a major role in the ascendancy of “Tea Party” Republicans.

LIMA CHARLIE NEWS

Lima Charlie provides global news, insight & analysis by military veterans and service members Worldwide.

For up-to-date news, please follow us on twitter at @LimaCharlieNews